Oil Prices Tumble as Eurozone Fears Grow

Heightened fears about a Eurozone-wide debt default and the devastating impact this would have on oil demand once against flung oil prices into the red Monday morning.

NEW YORK ( TheStreet) -- Heightened fears about a Eurozone-wide debt default and the devastating impact this would have on oil demand flung oil prices into the red Monday morning.

West Texas Intermediate (WTI) light sweet crude oil for December delivery was falling 56 cents to $98.43 a barrel and the December January crude contract was down 63 cents to $112.30 a barrel.

The U.S. dollar index was gaining 0.7% to $77.50 as investors fled risky assets.

"Optimism is tempered once more in the eurozone and Italy sees its bonds sell off again on a lack of confidence," says commodity analyst Matt Smith of Schneider Electric's Summit Energy.

Borrowing costs were once again rising to crisis levels in Italy. As reflected in an Italian bond auction Monday, it wasn't long before the markets turned skeptical about the eurozone's ability to control its debt crisis, after a period of relief in reaction to the installments of new governments in Greece and Italy.

The Italian Treasury had sold €3 billion, or $4.1 billion, of five-year bonds priced to yield 6.3%, near the euro-era highs of 7%.

The yield was about one percentage point higher than that paid at a similar auction in October.

"In order to bring more confidence to the markets, Italy's president appointed Mario Monti to take over as prime minister. However the markets were not satisfied," said Raymond James Energy analysts.

Despite the depressed European sentiment, expectations of $100 WTI oil prices are still on the horizon as the markets hope for positive headlines news out of the U.S. this week. Reports on the U.S. housing market, industrial production and retail sales are due out this week.

"Although crude is starting the week heading lower, there is so much economic data and so much news flow to move markets -- from Iran's nuclear situation to European debt woes -- that crude could easily re-test $100 this week," said Smith.

"That said, the rejection of a move above $100 in the last few days highlights that it will likely take a concerted bout of buying to push crude through this psychological level -- and one that there isn't enough conviction behind at this moment."

The Army Corp of Engineers dealt the pipeline operators a setback Sunday, but the Trump administration said it supported the project's construction Monday and analysts feel rerouting won't be necessary.